When denying employment based on the results of a background check conducted by a Consumer Reporting Agency (CRA), the Fair Credit Reporting Act stipulates that the employer follow very specific adverse action procedures set forth in sections 604(b) and 615(a). Two companies were apparently not well versed in these rules and ended up with a combined fine of $77,000. That’s a big chunk of change – struggling economy or not.
Our recommendation: Employers should brush up on their obligations as users of consumer reports and speak with their legal department to ensure compliance.
For release: 08/11/2009
Two companies that fired workers and rejected job applicants based on background checks without informing them of their rights under the Fair Credit Reporting Act (FCRA) have agreed to settle Federal Trade Commission charges that they violated federal law. The settlements require the defendants to pay $77,000 in civil penalties and bar future FCRA violations.
Employers often conduct background checks and seek employees’ and job applicants’ credit records, criminal histories, and other background information from a consumer reporting agency (CRA) such as a credit bureau or background screening company. The FCRA requires that before taking adverse employment actions based on these consumer reports – for example, firing employees or denying job applications – employers must provide the employees or applicants with a copy of the report, identify the CRA that provided it, notify them that the CRA did not make the adverse action decision, and inform them that they have the right to obtain a free copy of the report from the CRA and dispute its accuracy.
According to the FTC’s two complaints, both defendants contracted with a CRA to conduct background checks including criminal record reviews for employees and job applicants, and made hiring and firing decisions based on those background checks. The companies allegedly failed to provide the employees and applicants with pre-adverse action notices and adverse action notices as required by the FCRA.
The settlements require Quality Terminal Services, LLC and Rail Terminal Services, LLC to pay $53,000 and $24,000 in civil penalties, respectively, and to provide the FCRA-required notices in the future. The settlements also contain record-keeping and reporting provisions to allow the FTC to monitor compliance.